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SIR – I found A MCQ Relating Revenue
1.Where The Progress & Overall Profit Is Unknown – no contract asset or Liability Can Be Recognised .
2. Where The Progress & Overall Profit Are Unknown ; Revenue Should Be Recognised To Level Of Recoverable Costs .A. Only 1 Is True
B. Only 2 Is True
C. Both True
D. Both False .I would have thought the answer should be “Only 1 is True”
What does the printed solution say?
Book Says The Same …
But Doesn’t Provide Explanation As to Why Point No 2 Is Incorrect .If option 2 were correct, what would be your double entry?
Dr Receivable (amount of recoverable costs)
Cr RevenueBut that means that you are now recognising an asset and we’ve just agreed (I hope) that we shouldn’t recognise a receivable where the progress and overall profit is unknown
OK now?
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